New Zealand -- Sanctions Compliance Regulatory Overview

New Zealand, like many other nations, imposes sanctions and restrictions to combat terrorism financing, proliferation financing, and other illicit activities. While there isn't a specific "crypto sanctions" list, the general sanctions regime applies to all financial assets, including cryptocurrencies. Virtual Asset Service Providers (VASPs) in New Zealand are considered "reporting entities" under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act) and are therefore subject to stringent compliance obligations.

Here's a breakdown of the cryptocurrency sanctions and restrictions in New Zealand:

1. Primary Legal Framework for Sanctions in New Zealand

New Zealand's sanctions regime is primarily based on two pillars:

• United Nations Security Council (UNSC) Sanctions: New Zealand is a member of the UN and is legally bound to implement UNSC resolutions under the United Nations Act 1946 and the Terrorism Suppression Act 2002. These resolutions mandate sanctions against certain individuals, entities, and countries.
• Autonomous Sanctions: New Zealand has the power to impose its own sanctions, independent of UN mandates, under the Autonomous Sanctions Act 2021. This allows NZ to respond to serious international matters that threaten peace and security.

All financial services, including those involving cryptocurrencies, are subject to these overarching frameworks.

2. OFAC/EU/UN Sanctions Compliance Requirements for VASPs

2.1. UN Sanctions Compliance

• Directly Binding: UN sanctions are directly implemented into New Zealand law via the United Nations Act 1946 and the Terrorism Suppression Act 2002.
• Obligation for VASPs: VASPs are legally required to comply with all UN sanctions. This includes:
  • Asset Freezes: Immediately freezing the assets of individuals or entities designated under UN sanctions. This explicitly includes virtual assets.
  • Prohibition on Funding: Not making funds or economic resources available, directly or indirectly, to designated individuals or entities.
  • Reporting: Reporting any frozen assets or suspicious transactions involving sanctioned parties to the New Zealand Financial Intelligence Unit (FIU) and other relevant authorities (e.g., Police, Department of Internal Affairs - DIA).
• Designated Entities & Individuals: The Ministry of Foreign Affairs and Trade (MFAT) publishes the official list of individuals and entities designated under UN sanctions that apply in New Zealand.
  • MFAT Sanctions: https://www.mfat.govt.nz/en/peace-security-and-extractive-industries/sanctions/
  • Designated Terrorist Entities (under Terrorism Suppression Act 2002): https://www.police.govt.nz/advice/warnings-and-safety/terrorist-organisations-and-designated-individuals

2.2. OFAC (US Office of Foreign Assets Control) Sanctions

• Not Directly Binding in NZ Law: OFAC sanctions are US federal law and are not directly legally binding on New Zealand entities unless those entities also have a nexus to the US (e.g., US citizens/residents, transactions in USD, using US financial systems, having a US parent company or subsidiary).
• Practical Implications for VASPs: Despite not being directly legally binding in NZ, compliance with OFAC sanctions is highly advisable for VASPs due to:
  • Extra-territorial Reach: OFAC has significant extra-territorial reach. Transactions involving US persons, US-origin technology, or USD can fall under OFAC's jurisdiction, regardless of where the VASP is based.
  • Correspondent Banking: Many global banks (including those that might facilitate fiat on/off-ramps for VASPs) process USD transactions and are themselves subject to OFAC. They will often de-risk or terminate relationships with VASPs that do not screen against OFAC lists.
  • Reputational Risk: Associating with sanctioned entities, even indirectly, carries significant reputational risk.
  • Interoperability: Global crypto exchanges and services often operate across jurisdictions, making it practical to screen against global lists.
• OFAC Sanctions List (SDN List): https://home.treasury.gov/policy-issues/financial-sanctions/sanctions-programs-and-country-information

2.3. EU Sanctions

• Not Directly Binding in NZ Law: Similar to OFAC, EU sanctions are not directly legally binding on New Zealand entities unless there is a specific nexus to the EU (e.g., EU citizens/residents, transactions involving EUR, having an EU parent company or subsidiary).
• Practical Implications for VASPs: For similar reasons as OFAC, New Zealand VASPs dealing with EU customers or interacting with EU financial systems are strongly advised to screen against EU sanctions lists to mitigate risks.
• EU Sanctions Map: https://www.sanctionsmap.eu/

3. Sanctioned Entity Screening Obligations for VASPs

Under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT Act), VASPs are classified as "reporting entities" and must:

• Conduct Customer Due Diligence (CDD): This includes identifying and verifying the identity of customers and beneficial owners. As part of this, VASPs must screen customers against relevant sanctions lists.
• Risk Assessment: Develop and maintain a comprehensive risk assessment that identifies and assesses the money laundering and terrorism financing risks, including sanctions risks, that the VASP may reasonably expect to face.
• AML/CFT Programme: Implement an AML/CFT programme that sets out the policies, procedures, and controls to detect, deter, and mitigate these risks. This programme must detail how sanctions screening is conducted.
• Ongoing Monitoring: Continuously monitor transactions and customer relationships to detect suspicious activity and ensure ongoing compliance with sanctions obligations. This requires regular (e.g., daily) screening against updated sanctions lists.
• Reporting Suspicious Activities: If a VASP identifies a customer or transaction linked to a sanctioned entity, or suspects an attempt to evade sanctions, they must file a Suspicious Activity Report (SAR) with the FIU.
• Asset Freezing: If a VASP identifies "terrorist property" (as defined in the Terrorism Suppression Act 2002) or other assets belonging to a UN-sanctioned individual/entity, they must immediately freeze those assets and report the freeze to the Police and the FIU. This applies to virtual assets as well.

Relevant Legislation & Guidance:

• Anti-Money Laundering and Countering Financing of Terrorism Act 2009: https://www.legislation.govt.nz/act/public/2009/0035/latest/DLM1588820.html
• DIA AML/CFT Guidance (General): https://www.dia.govt.nz/aml-cft-reporting-entities
• DIA Guidance for VASPs: The DIA has issued specific guidance for VASPs, affirming their obligations under the AML/CFT Act. While not explicitly linked to sanctions, the general AML/CFT obligations underpin sanctions compliance.
  • Anti-Money Laundering and Countering Financing of Terrorism Act 2009 - Phase 2 (for virtual asset service providers): https://www.dia.govt.nz/__data/assets/pdf_file/0010/240590/AML-CFT-Phase-2-Guidance.pdf (See Section 3.1.2 which includes "persons dealing in virtual assets or providing services relating to virtual assets" as reporting entities).

4. Geographic Restrictions

Sanctions regimes inherently involve geographic restrictions, targeting specific countries, territories, or regions. For example, UN sanctions are in place against:

• Democratic People's Republic of Korea (DPRK): Comprehensive sanctions covering various sectors, including financial services and proliferation-related activities.
• Iran: Sanctions related to nuclear proliferation.
• Other UN-Designated Regions: Various other UN sanctions programs target specific individuals or entities within regions of conflict or concern (e.g., Afghanistan, Central African Republic, Democratic Republic of Congo, Libya, Somalia, Sudan, Yemen).
• Russia: While New Zealand has implemented autonomous sanctions against Russia under the Autonomous Sanctions Act 2021 due to the conflict in Ukraine, the UN has not imposed comprehensive sanctions against Russia as a whole.
  • Autonomous Sanctions (Russia Sanctions): https://www.mfat.govt.nz/en/peace-security-and-extractive-industries/sanctions/new-zealand-autonomous-sanctions-against-russia/

VASPs must be vigilant about the origin and destination of virtual assets, the location of their customers, and any potential nexus to sanctioned geographies.

5. Penalties for Violations

Violations of sanctions and AML/CFT laws in New Zealand carry severe penalties:

• Under the AML/CFT Act 2009:
  • Civil Penalties: For reporting entities, this can include fines of up to NZD $2 million for individuals and up to NZD $5 million for body corporates for contravening a civil penalty provision.
  • Criminal Penalties: For serious breaches (e.g., intentionally failing to comply), individuals can face imprisonment for up to 7 years or a fine of up to NZD $300,000, and body corporates a fine of up to NZD $5 million.
• Under the Terrorism Suppression Act 2002:
  • Dealing with terrorist property (including virtual assets) can result in imprisonment for up to 14 years.
• Under the United Nations Act 1946:
  • Breaching sanctions orders made under this Act can result in imprisonment for up to 12 months or a fine of up to NZD $10,000.
• Under the Autonomous Sanctions Act 2021:
  • Serious breaches can lead to fines of up to NZD $1 million for individuals and up to NZD $100 million for body corporates, and imprisonment for up to 7 years for individuals.

These penalties underscore the critical importance of robust compliance programmes for VASPs.

6. Country-Specific Sanctions Lists Applicable to Crypto

New Zealand does not have a "crypto-specific" sanctions list. Instead, its general sanctions lists, which apply to all financial instruments and economic resources, include crypto. The key lists VASPs must screen against are:

• New Zealand Consolidated Sanctions Lists (from MFAT): These combine UN and autonomous sanctions.
  • MFAT Sanctions: https://www.mfat.govt.nz/en/peace-security-and-extractive-industries/sanctions/
• Designated Terrorist Entities (from NZ Police, under Terrorism Suppression Act 2002):
  • NZ Police List: https://www.police.govt.nz/advice/warnings-and-safety/terrorist-organisations-and-designated-individuals
• Autonomous Sanctions (e.g., against Russia): Managed by MFAT and publicly available.
  • New Zealand Autonomous Sanctions against Russia: https://www.mfat.govt.nz/en/peace-security-and-extractive-industries/sanctions/new-zealand-autonomous-sanctions-against-russia/

VASPs should regularly check these official New Zealand government sources for updates, as sanctions lists can change frequently. Additionally, for the practical reasons mentioned above, screening against OFAC's SDN list and relevant EU sanctions lists is highly recommended for any VASP with international exposure.

Disclaimer: This information is for general guidance only and does not constitute legal advice. VASPs in New Zealand should seek independent legal counsel to ensure full compliance with all applicable sanctions and AML/CFT obligations, which are complex and subject to change.